[Hidden-tech] LLC questions

[Charlton Wilbur]

On Feb 1, 2007, at 12:50 PM, Charlie Heath wrote:

> My conclusion is that over time, an LLC probably costs a bit less  
> and has a
> bit less paperwork to maintain for a simple software contracting  
> firm.  Your
> mileage may vary!

Another thing to consider is that corporations are registered in a  
particular state, and conducting business in a state (the sort of  
thing that subjects you to taxes in that state) often requires a  
foreign corporation registration.

For instance, it's far cheaper to register an LLC in Delaware than in  
Massachusetts, but if you want to conduct business as a corporate  
entity in Massachusetts -- doing things like renting office space or  
having a bank account in a Massachusetts bank -- you need to register  
that Delaware LLC as a foreign corporation in Massachusetts before  
you can do anything else.  Larger companies, especially those with  
holdings in multiple states, can save enough through creative  
bookkeeping to make this sort of a setup worthwhile, but small  
companies generally don't.

It's probably worth consulting an accountant and a small-business  
lawyer for details; better safe than sorry.  As you note:

> Caveat, though: if you ever really need the INC status, you'd
> better have filed and maintained your records correctly.

That's definitely the case; if you register the corporation yourself,  
and make a mistake or miss an important detail, you'll save a couple  
hundred in lawyers' fees, but you'll open yourself up to a lot more  
liability.  I'm not sure how foreign corporation status would relate  
to someone who lives in Massachusetts but has clients in Connecticut,  
for instance, and that's the sort of thing I'd want to make sure was  
completely covered before I took on a Connecticut client.

Charlton

-- 
Charlton Wilbur
cwilbur at chromatico.net